Obama and the GM bailout….tax per car?

by
Skip

I was at a meeting of the Lakes Region Porcupines earlier today(mostly Libertarians – I am the  "token Conservative of the group; heh!) and someone mentioned taxes and something to the effect of "and how would you like to pay $40K of taxes on a $20K car".  I immediately thought of the GM bailout that Obama structured (that screwed the Senior bondholders in favor of the UAW and other unions) that had been hovering at the $14 billion to the bad for taxpayers.  Problem is, that number is now wildly optimistic!  In fact, The stock price of GM has to hit about $53 / share in order for US taxpayers to be made whole; right now, it is on the order of $21.68. But the news is worse:

The Treasury Department yesterday revised its loss estimate for the Government Motors bailout from $14.33 billion to $23.6 billion, thanks to the company’s sinking stock price. GM’s Sept. 30 closing price, on which the new estimate is based, was $20.18, about $13 less than its December IPO price and $35 less than what is needed for taxpayers to break even.

The $23.6 billion represents a 25 percent loss on the feds $60 billion direct “investment” in GM. But that’s not all that taxpayers are on the hook for. As I explained previously, Uncle Sam’s special GM bankruptcy package allowed the company to write off $45 billion in previous losses going forward. This could work out to as much as $15 billion in tax savings that GM wouldn’t have had had it gone through a normal bankruptcy. Why? Because after bankruptcy, the tax liabilities of companies increase since they have no more losses to write off.

This means that the total hit to taxpayers, who still own about a quarter of the company, could add up to $38.6 billion. That’s even more that the $34 billion on the outside I had predicted in May.

Worldwide production is approximately 8,476,192 units, so if you do the math, it ends up to be around  $4,600 per car as a "stealth" tax.  No, not even close to the "$40K" tax, but still more than what most people know – and with that, we see how Government can distort the pricing of a commodity (an additional $23% more expensive vehicle).  Pop that down to just US production (2,215,227) and the result is $17,400 / car.

Now, the EPA has just admitted that, because of the higher CAFE standards that it is arbitrarily imposing on US citizens, the price of cars will be rising by about $2,000 (and one report says up $10K) because of the engineering required.

No, it is not paid at the point of sale, but if Enviro-wackos can yammer about the "negative externalities" of a carbon based economy (in their attempts to have the cost of gas skyrocket), why can’t I just point out an deliberately induced negative externality placed upon US taxpayers simply due to crony unionism (e.g., rent-seeking by a politically connected union) by Obama.

Author

  • Skip

    Co-founder of GraniteGrok, my concern is around Individual Liberty and Freedom and how the Government is taking that away. As an evangelical Christian and Conservative with small "L" libertarian leanings, my fight is with Progressives forcing a collectivized, secular humanistic future upon us. As a TEA Party activist, citizen journalist, and pundit!, my goal is to use the New Media to advance the radical notions of America's Founders back into our culture.

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